Shares of Swiggy Ltd slipped below their IPO price on Friday as the stock hit a new all-time low at Rs 379.20 during the session. The stock dropped nearly 2.5 per cent during the trading session to hit new-lows, dragging the overall correction to about 40 per cent from its all-time high at Rs 617. The total market capitalization of the company has slipped below Rs 90,000 crore mark.
Swiggy shares were listed on November 13, 2024 when the company sold its shares for Rs 390 apiece to raise a total of Rs 11,327.43 crore via primary market route. The stock had delivered a mild listing pop of 8 per cent over the issue price, debuting at Rs 420 on the bourses but has tumbled 10 per cent from listing price as well.
Brokerages (both domestic and international) largely remain positive on the stock and see it to deliver strong returns in the coming months citing the strong growth potential and improving food delivery platform. However, others believe that quick commerce's (QC) muted performance and competitive intensity shall dent the prospects for the company.
Swiggy reported widening of its net loss by 39 per cent to Rs 799 crore in the quarter ended December 31, 2024, It reported a net loss of Rs 574 crore in the year-ago period. However, the food delivery platform's revenue from operations rose 31 per cent to Rs 3,993 crore in Q3FY25 as against Rs 3,049 crore in Q3FY24.
Swiggy’s food delivery GoV growth was at 19.2 per cent YoY and 3.4% QoQ. Food delivery CM was at 7.4% of GOV and expanded 80 bps qoq, driven by a higher platform fee. Instamart’s Gov grew a solid 88 per cent and 16 per cent YoY and QoQ, respectively driven by the addition of 96 stores in 3QFY25, said Kotak Institutional Equities.
"Instamart’s CM declined 270 bps QoQ to -4.6 per cent due to competition and new store additions. Market share stabilization in food delivery is a positive, but investments in QC will cloud near-term financials," Kotak added with a 'buy' rating and a target price of Rs 500.
Swiggy’s operating performance was weak in 3Q as sharp increase in quick commerce (Instamart) losses offset all-round improvement in the food delivery (FD) segment, said JM Financial. The trends could significantly intensify the pressures on Swiggy’s stock price in our opinion in the near term, despite valuation support on account of improved growth/margin trajectory of the food delivery business, it said with a revised target price of Rs 500 but maintained its 'sell' rating.
The Bengaluru-based new age internet company saw its gross order value (GOV) grow 38 per cent YoY to Rs 12,165 crore, while its consolidated adjusted Ebitda loss reduced around 2 percent YoY to Rs 490 crore. However, on a sequential basis, Ebitda loss was up slightly to Rs 149 crore, the company's financial statement said.
QC is expected to grow faster, with orders increasing at 25.4 per cent annually, AOV growth at 3 per cent and GOV growth at 29.2 per cent, said Motilal Oswal Financial Services. "Our profitability estimates for FY25/FY26/FY27 have been hit by aggressive dark store expansion," it added with a 'neutral' rating and a target price of Rs 460 on the stock.
Among the global brokerages, CLSA has maintained its 'outperform' rating on Swiggy with a target price at Rs 750, suggesting a nearly 98 per cent upside potential. Bernstein also has an 'outperform' tag on Swiggy with a target price at Rs 575. On the other hand, Macquarie still sees a 40 per cent correction in Swiggy, maintaining its 'underperform' stance with a target price of Rs 225.
"We see challenged economics in QuickCommerce, slower growth in Food Delivery, and stretched valuations. As a platform, we continue to prefer Zomato over Swiggy,” said Macquarie’s note.
The salience of QC to valuations has increased and execution will be key for re-rating, said Elara Capital. "Swiggy’s market cap is about 60 per cent lower than Zomato, which is seen aligned to 50 per cent/25 per cent gap (versus Zomato) in QC/FD GMV, 34 per cent/27 per cent gap in active users in QC/FD and 30 per cent lower dark store count," it added without rating the stock.
The CM decline was partially due to dark store additions, though the magnitude of the miss suggests CM of existing stores also posted a compression. Dark store expansion accelerated in the second half of the quarter and picked up further in January, creating a headwind for Q4, said Nuvama Institutional Equities, which has also not rated the stock.